The Hedgehog (Hh) signal transduction cascade has been conserved from Drosophila through mammals and plays a key role in many developmental processes. The goal of the proposed research is to use the advantages of Drosophila to understand this signaling system in detail. A key target of Hh signaling is the transcription factor Cubitus interruptus (Ci). In previous work, Ci's role in the expression of Hh target genes was examined, and its regulation by other components of the Hh signaling pathway studied. The results demonstrated that Ci function is regulated at three levels, proteolytic cleavage, nuclear import and activation. By specifically regulating these different functions, distinct domains of gene expression are established in response to Hh signaling. This research will be extended by pursuing the following aims: 1) Genetic and biochemical approaches will be used to elucidate the molecular basis of Ci regulation by Hh. Activation of Ci appears to require direct phosphorylation by protein kinase A (PKA). Is there a specific PKA site required for Ci activation, and how does phosphorylation lead to activation? Are other phosphorylation sites on Ci Hh regulated? 2) The cell biology of Hh signal transduction will be studied using EM on the embryonic epidermis and light microscopy of salivary glands. Does the Ci signaling complex exist in different forms? Do these complexes have different subcellular distributions, and is one a precursor to the other? 3) Work will be continued on Ci regulation of the dpp-HO enhancer.. Is binding of Ci necessary to for the formation of the enhancer complex, and are there distinctions between the initiation of expression and its maintenance? Hh signal transduction has been implicated in a number of congenital abnormalities and a variety of cancers including basal cell carcinoma. By understanding the details of this conserved pathway, it should be possible to design better diagnostics and therapeutics for these important diseases.